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Level 1

Is reverse mortgage interest deductible

 
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Employee Tax Expert

Is reverse mortgage interest deductible

It is not - unless you paid off the loan in full.

Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt.

However, for reverse mortgages, you can deduct amounts you paid for qualified mortgage insurance. The insurance must be in connection with home acquisition debt- the deduction is not available for the portion relating to other types of indebtedness, such as home equity indebtedness. Also, the insurance contract must have issued after 2006.

For more information, please refer to IRS publication 936, page 8.

4 Replies
Employee Tax Expert

Is reverse mortgage interest deductible

It is not - unless you paid off the loan in full.

Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt.

However, for reverse mortgages, you can deduct amounts you paid for qualified mortgage insurance. The insurance must be in connection with home acquisition debt- the deduction is not available for the portion relating to other types of indebtedness, such as home equity indebtedness. Also, the insurance contract must have issued after 2006.

For more information, please refer to IRS publication 936, page 8.

Level 1

Is reverse mortgage interest deductible

It is still not clear to me that any of the Mortgage Interest or MIP I accrued on my reverse mortage is deductible now that I've sold my house. I received a Form 1098 from the lender showing the total amount of interest received from the payer in Box #1 and MIP premiums in Box #5. If any of this is deductible, how many years can I spread this deduction out?
Level 1

Is reverse mortgage interest deductible

I'm still waiting for an answer to my question about number of years this significant amount (over $16,450) can be carried forward, and I would like to know what is meant by "home equity indebtedness."Seems like over $90,500 in interest deduction is a lot to kiss goodbye.
Level 1

Is reverse mortgage interest deductible

I have the same question.  is there some guidance that can be given?  walking through TT there is no mention of where to enter the interest and/or MIP for a Reverse Mortgage - only a HELC or regular mortgage.  This should be addressed in TT due to the number of Reverse mortgages and the potential of payoff and sale of a home that has a Reverse mortgage